5 Reasons to Improve Your Forecasts
Are you better at forecasting than you were a year ago? Creating forecasts for you construction company is probably one of those things that you know you should do, but often falls down the priority list. However, improving your forecasting skills can make a real difference in your bottom line.
Not sure if it's worth the time to work on your forecasting skills? Here are five reasons to work on improving your forecasts:
1. So you can establish the best road map for your business. By performing what-if scenarios, you can better visualize answers to questions such as:
- What is the revenue impact if we focus on one type of work?
- Are we better off buying or renting equipment?
- If we win 20% less work, how can we offset the loss?
2. So you can protect and improve your bonding and credit - Bond companies, surety brokers, and banks want to see if you will be able to pay your debts on time. Many require sound cash forecasts to confirm your performance will meet the minimum criteria.
3. So you can manage more confidently - Periodic forecasting will enable you to know when to be more aggressive and when to tighten the purse strings.
4. So you can course correct. Well-devised forecasts give you time to make changes if you’re in trouble. For example, if you projected an 11% year-over-year increase in annual contracts but in your first quarter you only saw a 2% increase, you may need to make changes in sales and marketing or cut your projections.
5. So you can better understand what you can control and what you can’t When you forecast, it becomes clear that much of what happens in your business is beyond your control (costs increase, the market cools). But there are many aspects you can influence. For example, if you can devise strategies to get paid days earlier, it can give you the freedom to borrow less.
Do you have any forecasting tips you'd like to share? Drop us a note in the comments below.